Zion Preparatory Academy, grappling with budget problems, has sold its 6-acre campus in Seattle's Columbia City neighborhood to a developer for $5 million — about one-third what it was offered a few years ago, its leader says.

The economic downturn "put us up against a wall," Head of School Doug Wheeler said Wednesday. "Sometimes you have to make tough decisions."

The private pre- and elementary school, whose 250 students are primarily low-income and African-American, will lease the campus and continue to operate there until at least 2013 while it searches for a new home, Wheeler said.

The school opened nearly 28 years ago, he said, and the sale puts it in position to keep going for at least another 28.

Proceeds will beef up the school's endowment, he added. A drop in donations forced Zion to close its middle school and lay off teachers earlier this year.

The buyers, a group headed by Seattle developer Jim Mueller, envision a "mixed-use" residential and commercial redevelopment but have no specific plans.

Those will emerge from conversations with the community, Mueller said Wednesday.

Any project will be "urban, transit-oriented and sustainable. That's really all I know at this point," he said.

But nothing will be built until the economy recovers, Mueller added.

The campus is one block east of Sound Transit's Columbia City light-rail station on Martin Luther King Jr. Way South, and two blocks west of Columbia City's blossoming business district along Rainier Avenue South.

Zoning allows three-story apartment buildings or town houses. Mueller said it's too soon to say whether redevelopment would entail a zoning change to allow more density.

Developers have proposed at least a dozen condo and apartment projects along the new light-rail line in Southeast Seattle. Most are on hold because of the recession.

Before striking out on his own, Mueller was senior director of real-estate development for Vulcan Real Estate for five years. He played a key role in that firm's ambitious plans to redevelop South Lake Union.

His firm, JC Mueller, has permits to build three apartment projects in the Central District and Capitol Hill.

Zion Prep bought its campus at 32nd Avenue South and South Alaska Street in 1993.

The property had been a state vocational-rehabilitation center.

Wheeler said Zion recognized about three years ago the property was ripe for redevelopment and began exploring a sale.

It received bids from three prospective buyers, including Mueller.

"Then everything collapsed," Wheeler said.

As for a permanent home, Wheeler said Zion will explore long-term leases at closed Seattle public schools.

The vacant Columbia School building a few blocks away is a possibility, he said.